Learning Objectives• Ask Why, Asshole? • Identify the types of threats professional accountants encounter and identify ways of minimising these. • Outline the disciplinary procedures for accountants. • Discuss the role of ethics in a global environment

Enron: The Smartest Guys in the Room?

Threats to Accountants• Code of Ethical Conduct • Compliance with these principles may be undermined by the following 5 threats from APES 110: • Self-Interest Threat ▫ may occur as a result of the financial or other interests of a member or of an immediate or close family member.  A direct material interest in an audit client.  A loan from a client.

• Self-Review Threat

▫ may occur when a previous judgment needs to be reevaluated by the member responsible for that judgment.  An audit team member having recently been a director of the audit client.

Threats to Accountants
• Advocacy Threat
▫ may occur when a member promotes a position or opinion to the point that subsequent objectivity may be compromised.  Dealing in or promoting shares in the audit client.

• Familiarity Threat▫ may occur when, because of a close relationship, a member becomes too sympathetic to the interests of others.  An audit team member has a family member who is a director of the audit client.  Acceptance of a gift or preferential treatment.

• Intimidation Threat▫ may occur when a member may be deterred from acting objectively by threats, actual or perceived.  Threat of replacement over a disagreement with the application of an accounting principle.  A dominant personality attempting to influence the decision making process, such as the awarding of contracts

Professional protection against threats• Safeguards created by the profession, legislative acts and/or regulation ▫ Greater ongoing ethical education in the profession. ▫ Example of Corporate Governance is CLERP 9, which is similar to Sarbanes-Oxley Act (U.S) and...

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Abstract
The financial collapse of Enron had substantial and far-reaching ramifications throughout the financial investment field, tax compliance professions and the accounting profession. Intense Congressional scrutiny resulted in a new era of transparency in financial reporting, stricter reporting standards as provided in Sarbanes-Oxley and substantial penalties for failure to comply with new financial reporting and tax compliance standards in the Internal Revenue Code (Bottiglieri et. al., 2009)
Enron Assignment
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron undoubtedly is the biggest audit failure (Bratton, 2002). Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth. Several years later, when Jeffrey Skilling was hired, he developed a staff of executives that, through the use of accounting loopholes, special purpose entities, and poor financial reporting, were able to hide billions in debt from failed deals and projects. Chief Financial Officer Andrew Fastow and other executives were able to mislead Enron's board of...

...What are the three most important improvements in the governance structure that could result from Enron from SOX?
The Enron collapse has been on the failure of the corporate governance structure: that boards of directors did not do their jobs; that auditors did not do their jobs; that regulators did not do their jobs. Hence the improvements below could result from Enron from SOX.
1)_ Changes in the Audit Process.
The most detailed regulatory change is the new accounting regulatory system that federalizes most accounting supervision. The Public Company Accounting Oversight Board will have broad powers to set standards for accounting firms and to investigate and bring disciplinary proceedings against such firms. The legislation also regulates directly how the accounting function is performed. It limits contemporaneous consulting services performed by firms auditing public companies, and it requires registered public accounting firms to rotate their lead and review partners. This regulation of the auditing function also dips into corporate governance in that it requires auditors to report directly to the audit committee of the board, not to company management, and provides for the audit committee to be directly responsible for the appointment, compensation, and oversight of the work of the auditors. The Act requires directors who are audit committee members to be independent.
2)_ Changes in Internal Corporate Governance...

...company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet his objectives and review management performance. The board should set the company’s values and standards and ensure that its obligations to shareholders and others are understood and met. But the primary responsibility of the board of directors is to protect the shareholders' assets and ensure they receive a decent return on their investment.
b. The board of directors definitely could have prevented the fall of Enron. First of all, if the board of directors made the right strategies for Enron rather than created hundreds of SPEs to remove assets and debts off balance sheet, the picture of Enron could have made a difference. Secondly, if the audit committee of Enron could point out all those aggressive and risky accounting treatment and propose solutions, then the afterward damages could be eliminate or at least minimized.
c. The BOD of Enron should have known about the risks and apparent lack of independence with those SPEs. They should have listen to some of the accountants in Andersen who questioned the legitimacy of SPEs’ business transactions and do something to avoid this.
Q4.
When the auditor performs internal audit services and external audit services and then provides management consulting services for the same client, self-review threats arise. Because the auditor...

...Annexure D 1
Enron
Corporate
Governance
Issues
1
The role of a director, as described by Agatha Christie in her novel The Seven
Dials, is hopefully no longer appropriate:
“[Coote] got me in as a director
of something
or other, ” declares
one
character. “Ve~ good business for me – nothing to do except go down into the
Ci~ once or twice a year to one of those hotel places – Cannon Street or
Liverpool Street – and sit around a table where they have some veq nice new
blotting paper.
Then Coote or some clever Johnny
bristling with figures,
but fortunately
makes a speech simply
you needn ‘t listen to it – and I can tell
you, you often get a jolly good lunch out of it. “
Part 1 – Executive Summary
1.
On December
2, 2001, Enron Corporation,
publicly traded corporation
That bankruptcy,
then the seventh
largest
in the United States, declared bankruptcy.
the largest in US history at that time, sent shock waves
throughout the world. Thousands of Enron employees lost not only their
jobs but a significant part of their retirement savings; Enron shareholders
saw the value
thousands
creditors
of their investments
of businesses
in bankruptcy
around
plummet;
the world,
and hundreds,
were turned
court and are likely to receive
if not
into Enron
only a small
portion of the dollars owed to them.
2....

...made
following the major corporate collapses like Enron, WorldCom, Adelphia, Global Crossing,
K. Mart and Parmalat. Among these corporate collapses Enron is deemed to be the greatest
tragedy in corporate history. This article examines the reasons behind a corporate collapse
and point out the possible discrepancies. The example of the fallout of Enron is taken to
explain a corporate collapse.
Name:
Muhammad Asif Khan
LLM (University of Liverpool)
Member Khyber Pakhtunkhwa Bar Council
INTRODUCTION:
The 21st century has already experienced main reforms in the major corporate structures. The
Surbanes Oxley Act 20021 in USA and the Higgs and Smith reports (2003) in UK have
brought paramount reforms in the two major corporate systems. These reforms were made
following the major corporate collapses like Enron, WorldCom, Adelphia, Global Crossing,
K. Mart and Parmalat. Among these corporate collapses Enron is deemed to be the greatest
tragedy in corporate history.2 Some call it a Titanic miscalculation,3 and some compare it
with the frenzied corporation of Charles Ponzi.4 By 31st December 2000, Enron’s stock was
priced at $83.13 and its market capitalisation exceeded $60 billion dollars. It was also rated
as the most pioneering large company in Fortune’s Most Admired Companies survey. A year
later on 2nd December 2001, Enron filed for bankruptcy. The investors lost...

...“What Went Wrong at Enron?”
Trident University International
Phillip M. Cherry
Module 5 Case Assignment
ETH 501: Business Ethics
Dr. Michael Garmon
March 1, 2012
3/1/2012
Introduction
In this paper I will provide a critical evaluation of the Corporate Culture at Enron, explain how the business ethics and operations were influenced by the corporate culture, and what went wrong. In addition, I will describe what leadership’s roles and responsibilities were, how key leaders worked to negatively reshape the culture, and the adverse consequences as a result of their behavior. Lastly, I will discuss how Human Resource Management could have impacted the “moral compass” at Enron and affected a positive outcome. Let’s begin by looking at the events leading up to the formation of Enron.
The Creation of Enron
Willis Straus had been a long time chairman of InterNorth Corporation and was characterized as beloved, a father figure, who was powerful, but not arrogant (Madsen & Vance, 2009). It is a shame he did not stay on in some capacity after the merger with Houston Natural Gas which gave birth to Enron. He sounds like the type of leader that took a page out of the British Empire’s book on business. In the old days of the British Empire managing agents conducted business in a “gentlemanly”...

...An Ethical Analysis of the Enron Scandal
The Enron scandal is one that left a deep and ugly scar on the face of modern business. As a result of the scandal, thousands of people lost their jobs, some people lost their entire pensions, and all of the shareholders lost the money that they had invested in the corporation after it went bankrupt. I believe that Kenneth Lay, former Enron CEO, and Jeffrey Skilling behaved in an unethical manner without any form of justification, but the whistleblower, former Enron vice president Sherron Watkins, acted in a way that upheld moral principles.
I can understand Jeffrey Skillingâ€™s motivation, since money and greed are very powerful forces, occasionally driving even the most honest individuals to commit horrible acts. I might understand a destitute individual committing a dishonest act in order to feed themselves or their children, but Jeffrey Skilling was by no means destitute and had no just cause to even consider deceptive accounting. Personally, I am constantly faced with situations where it is possible for me to be dishonest and steal expensive items from the company I work for, but I choose not to since these things are needed by the company and are owned by the shareholders. I believe that I have no right to steal anything since I am living very comfortably, with respect to most humans, and I am satisfied with my economic position. If Jeffrey Skilling had...

...com
Management Finance
Enron case analysis
1. Which parts of the corporate governance system, internal and external, do
you believe failed Enron the most?
Answer:
I believe that both internal & external corporate governance system have shares of
failing Enron but the internal has more impact on the failure of this company as
following.
These are the internal corporate governance system problems of planning, capital structure & capital management.
1-Enron's management provides nontransparent financial statements did not clearly
depict its operations and finances with shareholders and analysts, In addition, its
complex business model and unethical practices required that the company use
accounting limitations to misrepresent earnings and modify the balance sheet to
portray a favorable depiction of its performance ignoring the liabilities .
2-way of calculating the earning & the profit very strange agent model" for reporting
revenue (where only the trading or brokerage fee would be reported as revenue),
Enron instead elected to report the entire value of each of its trades as revenue. So
this reveals (Between 1996 to 2000, Enron's revenues increased by more than
750%, rising from $13.3 billion in 1996 to $100.8 billion in 2000. This extensive
expansion of 65% per year was unprecedented in any industry, including the energy
industry which typically considered...